In a statement, FPA head of policy and government relations Ben Marshan said the industry association agrees in principle with proposals put forth by the ASIC Enforcement Review panel (established to strengthen the regulator’s enforcement capabilities), but does not support all the current proposals.

“The FPA disagrees with the proposed five-year maximum penalty for unlicensed conduct and recommends the penalty should be in proportion to the dishonest and intentional conduct, and the consumer detriment related to a breach in financial advice disclosure provisions,” he said.

The FPA noted that unlicensed conduct “shows intent to behave and act dishonestly and against the law”, but such conduct is punished less severely than the punishments faced by licensed advisers.

“It is disappointing that the ASIC Taskforce is continuing the focus on the disclosure regime, proposing criminal penalties for breaches of financial advice disclosure provisions that are double the proposed imprisonment penalties for unlicensed conduct,” Mr Marshan said.

The industry association also argued that penalties available to ASIC should not “perpetuate an over-cumbersome focus on compliance”, noting that evidence suggests increased disclosure doesn’t improve advice quality.

The FPA also recommended the penalty regime incentivise good conduct as well as “strongly disincentivise” misconduct within the industry, and that tolerance should be shown for advisers who make “unintentional mistakes”.

Mr Marshan said the proposed regime will maintain the “compliance driven culture” that presently exists in the financial services industry.

“We believe the enforcement options within the law should incentivise individual professionalisation, rather than focus on imposing disproportionate penalties for disclosure matters of mere negligence, which will continue to feed the compliance driven culture of financial services,” he said.